Sipp (retirement)

[HFJohnson]

Originally Posted by tspill

I agree, an IFA (INDEPENDENT) can be a good option for those that don't want to learn anything about this.
However, my experience is that fees can be quite high. Up to 3% up front and up to 1% per year.
In year 1, you need to make up to 4% plus inflation to break even. And you have to make over 1% plus inflation to do better.
That is a big ask. And advisors dont know what the markets will do better than anyone else (or they would be millionaires).

Where a good IFA can help a lot is understanding holistically a person's financial position and define a strategy.

It is like anything - you can pay someone to do a job; or you can learn and do it yourself.

See more...

Definitely yes to the independent thing. A 3% initial fee is very high though - I haven't yet worked for one that's charged nearly that much.

Investment returns are only part of the story. Where IFAs can also make a difference is advice on tax etc and how best to take your pension. A lot of people assume you have to take all of the tax free cash upfront for example when it can sometimes be better utilised later on

[disney332]

Originally Posted by HFJohnson

Definitely yes to the independent thing. A 3% initial fee is very high though - I haven't yet worked for one that's charged nearly that much.

Investment returns are only part of the story. Where IFAs can also make a difference is advice on tax etc and how best to take your pension. A lot of people assume you have to take all of the tax free cash upfront for example when it can sometimes be better utilised later on

See more...

I did 3% up front ... 1% ongoing.

Disney332

[tspill]

Originally Posted by HFJohnson

Definitely yes to the independent thing. A 3% initial fee is very high though - I haven't yet worked for one that's charged nearly that much.

Investment returns are only part of the story. Where IFAs can also make a difference is advice on tax etc and how best to take your pension. A lot of people assume you have to take all of the tax free cash upfront for example when it can sometimes be better utilised later on

See more...

Totally agree.
Many would argue that for most people, taking the 25% TFLS up front is not the right thing to do.
Tax advice, inheritance advice etc are the things that can often be not well understood - can help many.

I think the %ages for IFAs varies quite a bit depending on the amount being managed. My struggle is that with the modern very consumer friendly products available now, it has become incredibly difficult for IFAs to get better returns after fees.

[HFJohnson]

Originally Posted by tspill

They are just two different strategies. For me, even with a 60% equities portfolio - a 50% drop still loses you 30%.
So for me, a de-risking strategy wins out by a mile.
However, some may have a higher risk tolerance to me. To some and 30% drop might not worry them.
And this drop will happen. There is no doubt on this. It is just that we don't know when. Many say that we are long overdue a "crash". But who knows.

You should always stress test any strategy and common wisdom suggests a sensible worst case test of halving your equity portfolio on day one and see what this does to your financial plan.

See more...

You could argue that derisking comes with its own risks though. If you have a decent sized portfolio and only taking out a relatively small proportion of it, say 5% a year, then you have a large proportion of it left behind with little opportunity for growth on a fund that could be held for 30 years or longer if it gets passed on to the next generation. This isn't something we would recommend for even those with a really low tolerance for risk.

[disney332]

Originally Posted by tspill

Totally agree.
Many would argue that for most people, taking the 25% TFLS up front is not the right thing to do.
Tax advice, inheritance advice etc are the things that can often be not well understood - can help many.

See more...

Phasing is a good tax efficient retirement option.

Disney332

[tspill]

Originally Posted by HFJohnson

You could argue that derisking comes with its own risks though. If you have a decent sized portfolio and only taking out a relatively small proportion of it, say 5% a year, then you have a large proportion of it left behind with little opportunity for growth on a fund that could be held for 30 years or longer if it gets passed on to the next generation. This isn't something we would recommend for even those with a really low tolerance for risk.

See more...

Definitely. Totally agree.
Everyone's circumstances are different and until you have a plan (what you need and when), it is impossible to know what is right.

I have defined what I "need" for every year. And against this where it all comes from as income (two occupational pensions and two state pensions). So I know for each year what I need from my investments to top this up to meet my spending need. I have set my own investments up in this context.
Others will differ.

[LostPrincess]

Hi everyone, sorry to hijack, I'm a bit confused by something I've read here...

I have a pension with Vanguard in a Target Retirement 2060 fund (I'll be 65 in 2060). Of course nobody has a crystal ball but am I right in thinking I should be able to take 25% and then draw it down when I'm ready to retire? Or is an annuity my only option?

[HFJohnson]

Originally Posted by LostPrincess

Hi everyone, sorry to hijack, I'm a bit confused by something I've read here...

I have a pension with Vanguard in a Target Retirement 2060 fund (I'll be 65 in 2060). Of course nobody has a crystal ball but am I right in thinking I should be able to take 25% and then draw it down when I'm ready to retire? Or is an annuity my only option?

See more...

I don't know much about Vanguard personally but, based on current rules, you will have the following options:

1) Take the tax free cash and transfer the rest to purchase an annuity

2) Move your fund into drawdown with Vanguard and take the tax free cash/income in whatever combination you want

3) Transfer the fund elsewhere and do the above

As mentioned elsewhere, a targeted retirement fund isn't always the best option if you don't want to take an annuity. Also, you don't have to take all of the tax free cash lump sum upfront - it may be more tax efficient to take out smaller amounts over a number of years for example. As always, get some advice if you're not sure what to do for the best.

[disney332]

Originally Posted by LostPrincess

Hi everyone, sorry to hijack, I'm a bit confused by something I've read here...

I have a pension with Vanguard in a Target Retirement 2060 fund (I'll be 65 in 2060). Of course nobody has a crystal ball but am I right in thinking I should be able to take 25% and then draw it down when I'm ready to retire? Or is an annuity my only option?

See more...

No your options are open., dont panic

Under current rules you can take the pension at any time from 55 onwards, and still work if you so wish

So at 55 or any time later you can take 25% tax free cash (or a lesser amount and store up another tax free cash sum in the future - ie 15% then another 10 in 5 years)

Disney332

[tspill]

Originally Posted by LostPrincess

Hi everyone, sorry to hijack, I'm a bit confused by something I've read here...

I have a pension with Vanguard in a Target Retirement 2060 fund (I'll be 65 in 2060). Of course nobody has a crystal ball but am I right in thinking I should be able to take 25% and then draw it down when I'm ready to retire? Or is an annuity my only option?

See more...

Doing some maths, this makes you 25 now. That gives you 40 years.
TBH., if I was in your position, and I knew that I could lock the money away for 40 years, I would be investing 100% in a global equity tracker fund. And not look at it again for the next 20 years. And at that point start to think abut what to do in the 20 years running into retirement.
Yes, this is higher risk, but you have the time to make this work and likely get better returns. And tracker funds generally have lower charges and that will make a difference over a few decades.

And yes, under the current rules, you can take 25% tax free and drawdown the rest from 55 (likely to increase to 57).